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Will Wal-Mart Drag Down Consumer ETFs?
2/18/2013 7:44:00 PM
Retail giant Wal-Mart ( WMT ) is off to its worst start in seven years and American consumers are spending less money. The pinch of higher payroll taxes, which began on Jan.1, 2013 is already translating into less spending.
Here's what Jerry Murray, Wal-Mart's vice president of finance and logistics wrote in an internal email obtained by Bloomberg news :
"In case you haven't seen a sales report these days, February month-to-date ( MTD ) sales are a total disaster. The worst start to a month I have seen in my ~7 years with the company."
Wal-Mart along with 42 other stocks including Procter & Gamble, Coca-Cola, and Costco, is part of the Consumer Staples SPDR ETF (NYSEARCA:XLP).
Among the 386 companies within the S&P 500 that reported Q4
2012 earnings, 81% of consumer staples have beaten earnings
estimates, according to FactSet Research. However, based upon
current earnings estimates, Q1 2013 earnings for the entire S&P
500 are down -0.04%.
As we wrote to readers in the March 2013 edition of the
ETF Profit Strategy Newsletter
, the American Tax Payer Relief Act of 2012 has nothing to do with
genuine tax reform or relief. Unlike before, Americans now pay 2%
in Social Security taxes on their first $113,700 in income. For a
person making $40,000 per year, this means$780 of lost wages.
For a familyearning $50,000 the tax bite is equal to a basket of
groceries every single month, according to Wal-Mart's analysis.